Allegation that directors lacked authority to commit corporate landlord

In Hong Kong Hai Zhou Tong Xiang Association Ltd v Ngai Shun Wah ([2013] HKEC 739, LT) T’s tenancy expired in 2012. L sought possession on the basis that the fixed term had expired and that T had sub-divided the property in breach of covenant. T’s defences were that he had been granted a new lease until July 2016 and that L had known all along of the sub-division and had acquiesced. L responded that the directors who had countersigned the company seal lacked authority and that the seal that had been used was a fake. T succeeded on both counts.

First, even if the countersignatories lacked actual authority (the Tribunal thought they probably had actual authority) they had apparent authority ([15]). As for the seal, even if it were a fake (and the Tribunal was not persuaded of this) T could rely on the rule in Turquand ([21]). Further, L had cured any possible procedural irregularity: its acceptance of rent amounted to a ratification of the lease  ([23]).

L had known of and acquiesced in the sub-division and could not complain of it. In any event, it had not served the notice required by section 58 of the Conveyancing and Property Ordinance.

Michael Lower

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